SCENARIO 1:You are younger than 55 years on 1 March 2021

SCENARIO 2:You are 55 years or older on 1 March 2021

THE ANNUITISATION OF PROVIDENT FUNDS

Since 1 March 2016, provident fund members qualify for tax deductions on their contributions as has always been the case for pension fund members.

This is the second leg in harmonising pension and provident funds and takes effect 1 March 2021.

The annuitisation of provident funds will align the treatment of the payment of retirement benefits from a provident fund to the rules that apply to a pension fund.

WHAT DOES ANNUITISATION MEAN?

2021

THE IMPACT ANNUITISATION OF PROVIDENT FUNDS WILL HAVE ON

YOUR RETIREMENT BENEFIT DEPENDS ON YOUR AGE AS AT 1 MARCH 2021

THIS IS WHEN A LUMP SUM RETIREMENT BENEFIT OR PART THEREOF IS USED TO PURCHASE A PENSION THAT IS PAID IN MONTHLY AMOUNTS

1/3

2/3

WHEN YOU RETIRE

Younger than 55on 1 March 2021

WHEN YOU TRANSFER TO ANOTHER FUND AFTER 1 MARCH 2021

01 March 2021You are younger

than 55

2022You transfer to

a new fund

2029You retire from

new fund

Your vested portion as at 1 March 2021 will still be protected

IF YOUR NON-VESTED PORTION IS LESS THAN R247 500, YOU WILL NOT HAVE TO PURCHASE A PENSION AND YOU MAY TAKE YOUR FULL RETIREMENT BENEFIT IN CASH

SCENARIO 1

ONLY CONTRIBUTIONS INCLUDING INVESTMENT GROWTH MADE TO YOUR PROVIDENT FUND

AFTER 1 MARCH WILL BE AFFECTED

Contributions made before 1 March 2021 will

be known as your “vested”

portion

Contributions made after 1

March 2021 will be known as your “non-vested”

portion

All contributions including investment growth

until 1 March 2021

All contributions including investment growth after

1 March 2021 until you retire

You may take your full vested portion of your retirement benefit in cash

You will have to purchase a pension with a minimum of

two-thirds of the non-vested portion at retirement

VESTED 2/3

VESTED 2/3VESTEDNON-

VESTED

You will have to purchase a pension with a minimum of two-thirds of the non-

vested portion at retirement, you may take your full vested portion in cash

Your vested and non-vested portions will be maintained in the new fund - all future

contributions including investment growth from date of transfer will be allocated to your

non-vested portion

VESTED

WHEN YOU TRANSFER TO ANOTHER FUND AFTER 1 MARCH 2021

1 March 2021 In 2029

All contributions including investment growth as at 2022 (transfer date) may be taken in cash at retirement

You are 56 and a member of a provident

fund (1st fund)

You transfer to new fund

You retire from new fund

In 2022

You will have to purchase a pension with a minimum of two-thirds of your

non-vested portion at retirement

IF YOUR NON-VESTED PORTION IS LESS THAN R247 500, YOU WILL NOT HAVE TO PURCHASE A PENSION AND YOU MAY TAKE YOUR FULL RETIREMENT BENEFIT IN CASH

THE HARMONISATION OF PENSION AND PROVIDENT FUNDS MEANS THAT GOING FORWARD THERE WILL ONLY BE ONE TYPE OF BENEFIT STRUCTURE FOR RETIREMENT FUNDS AND WHETHER YOU PAY CONTRIBUTIONS TO A PROVIDENT OR A PENSION FUND, THE POSITION WILL BE THE SAME

SCENARIO 2

55 years or older on 1 March 2021

WHEN YOU RETIRETHERE IS NO NON-VESTED PORTION, IT IS ALL REGARDED AS YOUR VESTED PORTION

YOU WILL STILL BE ABLE TO RECEIVE YOUR FULL RETIREMENT BENEFIT INCLUDING INVESTMENT GROWTH IN CASH

2021

Transfers from a pension fundPreviously there was tax payable when transferring from a pension fund to a provident fund. From 1 March 2021, transfers from a pension to provident fund will be tax-free for all members.

Withdrawal benefitsAnnuitisation does not apply to withdrawal benefits. If you withdraw prior to reaching your retirement age you will not be denied access to your full retirement savings, both the vested and non-vested portions.

Solutions forRetirement Actuarial Investments Health Wealth www.simekaconsult.co.za

Although this communication has been prepared with due care and in good faith, it provides information and opinions of a general nature. The interpretations and opinions are those of the authors and are subject to change without notice. Simeka Consultants and Actuaries accepts no liability or responsibility if any information is incorrect or for any loss or damage, including but not limited to, direct, indirect or consequential loss, that may arise from reliance on information contained herein. It does not constitute advice and should not be accepted as such and no part thereof should be relied upon without seeking appropriate professional advice. Simeka Consultants and Actuaries (Pty) Ltd is an authorised Financial Services Provider.

VESTED VESTEDNON-

VESTED VESTED 2/3

Your vested portion will be maintained in the new fund - all future contributions including investment growth will be

allocated to your non-vested portion in the new fund